As any business continues to grow it must find new ways to maintain an edge in the marketplace. Finding ways to maximize the assets and investments you already have, is a great approach. Monitoring asset utilization helps ensure you are making the most of your assets. It also uncovers ways to get more out of your limited resources.
Understanding and improving this metric can lead to significant benefits for your organization. We’ll share how to calculate asset utilization along with why and how to improve it.
What is asset utilization?
Asset utilization measures how much an organization uses its equipment, machinery, and other valuable assets compared to how much it could be using those assets. It’s a good way to measure the value and productivity of assets and equipment to determine the best ways to get more use out of them.
Of course, there are reasons an asset may experience idle time or periods of downtime, such as planned or unplanned maintenance, holidays, or work schedules. Understanding asset utilization will help you identify patterns in downtime and uncover areas where you can make improvements. This will lead to better scheduling, enhanced maintenance practices, and more efficient use of resources, ultimately increasing productivity and reducing costs.
How to calculate asset utilization
The most basic asset utilization formula is pretty straightforward. If you assume that the most an asset can run in a year is 8,760 hours (the total number of hours in a year), then you simply subtract an asset’s annual total idle time from 8,760 to get the asset’s total production time. Then, divide that number by 8,760 to get your asset utilization ratio or percentage. In other words, you divide the total production hours by the total available hours.
Asset Utilization = [(8,760 – Total Hours of Idle Time) / 8,760] x 100
If you have a machine that has been idle for 2,000 hours over the course of a year, it has 6,760 hours of productive time. Those 2,000 could be made up of scheduled or unscheduled downtime events, changeovers, or other stoppages. Here’s how you would calculate the asset utilization:
- Subtract the idle time from the total hours: 8,760 – 2,000 = 6,760
- Divide by the total hours in a year: 6,760 / 8,760 = 0.771
- Multiply by 100 to get the percentage: 0.771 x 100 = 77.1%
This machine’s asset utilization is 77.1%, meaning it was productive and in use for 77.1% of the time over the past year.
The ideal asset utilization score is 70% or higher, so this example highlights a company whose assets are operating in good standing.
Asset utilization can be calculated on an annual basis, as in this example, or you can isolate various time periods for measurement and comparison.
While asset utilization rates are helpful, they don’t tell the whole story. So it’s a good idea to pair this metric with a few other key performance indicators (KPIs) to better understand how, where, and why your machines are experiencing downtime. Those key maintenance metrics include product yield, overall equipment effectiveness (OEE), unplanned downtime, and maintenance speed.
First pass yield
First-pass yield is the ratio of good products in a batch to the total number of planned units. This metric helps organizations determine which machines are working optimally and which are producing defective parts.
To calculate product yield, you’ll need two variables; the number of defect-free units produced and the total number of units produced.
Product Yield = (# of defect-free units produced / Total # of units produced) x 100
First-pass yield is relevant for asset utilization because it helps identify the efficiency and effectiveness of the production process. A higher first-pass yield indicates that the machines are producing a larger number of good-quality units on the first run, which means machines, materials, and labor are being utilized effectively.
Overall equipment effectiveness (OEE)
OEE is a comprehensive metric that measures how effectively an organization uses its equipment. It considers three factors: asset availability, performance, and quality.
OEE = Availability x Performance x Quality
To better understand how to calculate this metric, here are details on what makes up each component:
- Availability = Operating Time / Planned Production Time
- Performance = (Ideal Cycle Time x Total Count) / Operating Time
- Quality = Good Parts Produced / Total Parts Produced
OEE offers insights into how well assets are utilized. High OEE means that equipment is available, running at optimal speed, and producing quality products, supporting higher asset utilization. Low OEE points to inefficiencies that can reduce asset utilization ratios.
Unplanned downtime
Unplanned downtime is when a machine stops operating due to unexpected failures or other unplanned work stoppages, resulting in lost production time.
Unplanned Downtime = Total Unplanned Downtime Hours Per Period
Unplanned downtime directly reduces asset utilization because it represents the time that equipment is idle. Reducing unplanned downtime through better maintenance processes can increase asset utilization.
Mean time to repair and other failure metrics
Failure metrics such as MTTR, MTBF, and MTTF measure various aspects of maintenance and repair processes and workflows. They capture how quickly an organization responds to maintenance issues, performs maintenance activities, and gets equipment back into operation after a failure.
Quicker, more responsive, and more effective maintenance reduces the length and frequency of downtime events, improving overall asset utilization. Mean-time failure metrics are a great way to evaluate maintenance workflows and they can pinpoint specific steps in your maintenance workflow that impact utilization and productivity.
Why you should start using asset utilization
Asset utilization highlights the full capacity of an organization’s equipment. Low asset utilization may indicate that your organization is leaving valuable production time on the table, resulting in lower product output and unrealized revenue potential.
Measuring asset utilization gives your organization a starting point for fulfilling its production potential. It can be a useful indicator of underlying inefficiencies and it can also help your organization monitor progress toward growth over time.
Why you should work to improve asset utilization
Improving asset utilization leads to better production and great overall efficiency in your operations. When machines are operating at their optimal performance levels, your company can benefit from enhanced production, greater output, and more.
Increased efficiency
Improving asset utilization helps you maximize the efficiency of your equipment. If you have a machine that’s only being used 50% of the time, finding ways to increase its use can potentially double your production without needing to purchase additional equipment.
Example:
A manufacturing company discovers one of its priority assets is idle for 30% of the day due to shift changes. By adjusting shift schedules and training operators to perform quick changeovers, the company can increase the asset’s utilization, leading to higher production rates without additional capital investment.
Reduced costs
Better asset utilization can significantly reduce the maintenance costs associated with idle equipment, unnecessary repairs, and unplanned downtime. By ensuring optimal use of assets, the wear and tear is spread out, reducing the need for frequent repairs and maintenance.
Example:
A construction company implements a preventive maintenance schedule using asset utilization data. From the data, they are able to reduce the frequency of unexpected equipment failures, leading to fewer costly emergency repairs and extending the lifespan of their machinery.
Enhanced maintenance practices
Organizations that understand asset utilization can develop better maintenance schedules, resulting in fewer unexpected breakdowns. Regular, scheduled maintenance based on asset utilization data helps keep equipment in optimal condition.
Example:
A food processing plant uses asset utilization data to implement a condition-based maintenance program for its assets that have excessive downtime due to planned maintenance. They perform maintenance only when it is needed based on the asset’s condition, rather than on arbitrary intervals, reducing unnecessary downtime.
Optimized resource allocation
Knowing which assets are underutilized allows organizations to reallocate resources where they are most needed. This ensures all equipment is used efficiently and helps organizations make more informed decisions about investing in new equipment.
Example:
A manufacturing company uses asset utilization reports to identify underused machines on the production floor. They redistribute workloads and reassign tasks to these machines, ensuring optimal use of all equipment and improving overall production efficiency.
How to improve asset utilization
Several things can help your organization improve asset utilization. Projects like more careful maintenance scheduling, improved preventive maintenance, quicker troubleshooting and repairs, and more efficient workflows reduce both planned and unplanned downtime. This allows your organization to begin inching closer to higher utilization and production output. Primarily, we recommend following preventive maintenance best practices, along with the following activities:
- Monitor and analyze data: Regular monitoring of asset utilization metrics and maintenance data can help you identify trends and areas for improvement.
- Schedule regular maintenance: A preventive maintenance schedule can ensure your maintenance team regularly services equipment, reducing unplanned downtime.
- Optimize work schedules: Adjust work schedules to ensure that your organization uses its assets efficiently throughout the day.
- Invest in training: Train employees to operate equipment efficiently and perform basic maintenance tasks as needed.
- Use technology: Take advantage of advanced technologies such as IoT sensors, predictive analytics, and maintenance management software.
Improve asset utilization with the right tools
A Computerized Maintenance Management System or CMMS is a powerful tool that can help you track and improve asset utilization in your organization. With Limble, you can:
- Monitor real-time asset performance and utilization
- Schedule and track maintenance activities
- Generate detailed reports on asset usage, downtime, and maintenance history
- Implement predictive maintenance strategies to prevent unplanned downtime and enhance asset management
- Optimize resource allocation and improve overall operational efficiency
By leveraging a CMMS, you can ensure that your assets are being used to their full potential, leading to increased productivity, reduced costs, and improved maintenance practices. Schedule a free demo to learn more today!
